US President Donald Trump has threatened to open new fronts in his tariff war, as soon as on Tuesday, branding this “only appropriate way” to trade, announcing mutual levy on other countries.
Trump’s fresh salvo may bring a wide tariff growth for emerging market economies like India and the European Union valued taxes, stressful tension with blocks, warned by analysts.
What are mutual tariffs?
Tariffs are tax imposed on goods imported from another country.
For mutual tariffs – during the election campaign, Trump promised: “An eye for one eye, a tariff for a tariff, the same accurate amount.”
And on Sunday, he said that he would make a detailed announcement on the tariff on Tuesday or Wednesday, saying that “every country will be mutual.”
Goldman Sachs analysts stated in a note that one approach is to match the rate of tariff rates on imports with the rate of matching the rate that applies other countries to American products.
Matching it based on various products will increase the average tariff rate of the United States by about two percent. Doing so to match the average tariffs imposed by countries increases the US rate with a low amount.
But taking a product-centric approach leads to complications.
While in 2022, Washington has relatively low average tariffs, while in 2022, its “very politically sensitive” areas such as apparel, Chinese and pick-up trucks have high rates, the vice president of the Cato Institute of General Economics Scott Linnasicom Said.
Similarly, the calculus will add complications, including non-tariff barriers, like rules in calculus.
Who will be affected?
JP Morgan analysts hope that mutual tariffs can open the door for “a comprehensive tariff growth” on emerging market economies that have high duties, JP Morgan analysts expect.
If the authorities go through the average tariff rate applied to all products, countries like India or Thailand – which imports taxes at higher rates than the United States – may be affected.
Trump has earlier slammed India as a “very abusive” on trade and this week, the National Economic Council Director Kevin Haset told CNBC that India had high tariffs that shut down imports.
Lincicome warned that high tariffs are often imposed by poor countries, which use them as a tool for revenue and security as they have less resources to implement non-tariff barriers such as regulatory protectionism.
Goldman Sachs estimates that “there should be no impact on countries with free trade agreements such as Mexico, Canada and Korea, limiting the overall impact” if Washington took a country-based approach to mutual tariffs.
What are complications?
It is not clear that Trump sees the policy of mutual tariffs as an alternative to 10–20 percent universal tariff, which he floated on the campaign trail-or a separate policy.
One risk is that the Trump administration “can try to equalize non-tariff obstacles for business,” Goldman Sachs said in a note. In particular, he can consider the value enhanced taxes when deciding this to adjust the tariff.
Goldman analysts said that by doing so, the average effective tariff rate is raised to increase 10 percent points.
Such a step can also be a reaction to the Higher European Union Vats, JP Morgan said.
What is the goal?
“One of the objectives is to create uncertainty as a conversation strategy,” Jeffrey Shot, Senior Fellow of Peterson Institute for International Economics, told AFP, but uncertainty is a tax on trade. “
He said that tariffs, vengeance and unpredictability around the issue of non-business issues all contribute to a situation that weighs on American and foreign firms, he said.
In the case of colleagues like Europe, Shot said, “US objectives may include” economic and geopolitical priorities including Ukraine. “
They can find a better solution to the situation in Ukraine, fighting a Russian invasion since 2022, but also to expand American exports in major areas such as LNG.
two way street?
However, the United States does not have the lowest tariff in the world and when it comes to rich, industrialized countries, stands around the middle.
He said in a recent report, “Should Trump’s system be based on average tariff rates, then we will need a reduction in tariff rate on goods from dozens of countries for ‘True’ mutuality.”
(This story is not edited by NDTV employees and auto-generated from a syndicated feed.)
